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Blitz Bureau
NEW DELHI: The Government has decided to gradually phase out the Wholesale Price Index (WPI) and replace it with a comprehensive Producer Price Index (PPI) system. The decision was taken to modernise country’s inflation and pricing data framework and align it with global best practices.
The Commerce and Industry Ministry has said that the Government has approved the revision of the base year of the Wholesale Price Index (WPI) from 2011-12 to 2022-23. Considering the wide usage of WPI in price escalation clauses, this index will be released for five years from the date of release of the revised series along with PPI and will be discontinued thereafter.
The Ministry said that this will give sufficient time to users to switch from WPI to PPI. The revised Wholesale Price Index and New Producer Price Indices is scheduled to be released on June 15. The Ministry added that the number of items covered under the new series of WPI has increased from 697 to 957, providing broader representation of economic activity.
This shift aligns India with advanced global economies and IMF recommendations.
Five-year transition plan
Because WPI is heavily embedded in commercial and Government long-term contracts for price escalation clauses, the Government is not scrapping it overnight. Starting June 15, 2026, the Department for Promotion of Industry and Internal Trade (DPIIT) will publish both a revised WPI (updated to a 2022–23 base year) and the new PPI metrics simultaneously. This parallel run will last for five years, giving businesses and ministries adequate time to migrate their contracts before WPI is completely discontinued.
Three-pronged PPI framework
Unlike WPI, which tracks prices at the wholesale level, the PPI monitors basic prices at the factory or farm gate without net taxes and trade margins. It will introduce three separate indicators to map how inflation pressures pass through production stages:
• Output PPI: Tracks prices received by producers for their finished products.
• Input PPI: Measures the cost of raw materials and inputs purchased by producers.
• Services PPI: Captures price movements in the service sector.
Inclusion of services and better metrics
A major drawback of WPI is its exclusive focus on goods. The PPI fixes this by introducing service sector inflation tracking, initially covering seven key sectors: banking, securities transactions, insurance, pension fund management, railways, air passenger transport, and telecommunications. Capturing both input and output prices will eliminate double-counting and help economists implement “double deflation” to calculate India’s real GDP more accurately.